The Scandal

The Details of the Scandal

Make no mistake: the players at the heart of this scandal are in the upper echelon of the state's political world, and particularly the state's Republican party. Gary Pierce served on the Corporation Commission from 2007 to 2014, including as chairman [1]. He also served as a majority whip of the Arizona House of Representatives [2] and as a Yuma County supervisor [3]. His wife, Sherry Pierce has her own political connections; she served as the deputy district director for former U.S. Rep. Matt Salmon [4] and holds that same position today for U.S. Rep. Andy Biggs [5]. Their son, Justin, also served as a state representative and unsuccessfully ran for secretary of state in 2014 [6]. Gary and Sherry Pierce have given at least $14,520 to Republican candidates, and $2,616 to Democrats, over the years [campaign finance data accessed here.]

Jim Norton, in turn, has a close personal relationship with Governor Doug Ducey that stretches back to their days together at ASU [7]. At lobbying firms Axiom Public Affairs and R&R Partners, his clients included the Arizona Chamber of Commerce and Industry, Raytheon Co., Honeywell International, APS, and many others [8, 9]. Norton is a major campaign donor, having given at least $73,000 to Republican candidate, and $6,700 to Democrats, including at least $4,000 to Governor Doug Ducey [campaign finance data accessed here.]

You would think that Norton and Pierce would have gone out of their way to avoid associating with utility owner George Johnson. Johnson is infamous for his apparent willingness to put profit above public health and environmental protection; if you believe the many, many allegations that have come out over the years, Johnson has been guilty of everything from killing a herd of rare bighorn sheep [10] to destroying rare archeological sites [11] to delivering water contaminated with E.Coli in customers' homes [12]. In 2007, he was involved in a record settlement with the state for $12.1 million for environmental damages [13], and a report earlier this year said the utility ranked No. 2 in violations among the state's 10 largest water systems with at least one violation [14]. In just the few months since the bribery scandal broke, Johnson Utilities has been accused of over-charging customers [15], berating a customer in front of his home [16], spewing toxic levels of hydrogen sulfide into the air [17], and delivering water that's unsafe for infants to drink [18].

But, if the indictment is accurate, Norton and Pierce did not distance themselves from Johnson -- far from it. Instead, the three men created a quid-pro-quo bribery scheme, in which Gary Pierce led an effort to raise rates on the East Valley and Pinal County water customers of Johnson Utilities in return for $31,000 in illegal payments from Johnson. The indictment also details a scheme for Pierce to buy a $350,000 land parcel with funds provided by Johnson [19].

The money was laundered through Norton’s consulting company in order to conceal the payments from the authorities. A co-conspirator, who was not named or indicted, acted on Norton’s direction and charged Johnson $6,000 a month for “consulting” services. That co-conspirator then gave Sherry Pierce simple tasks and had her submit monthly invoices of $3,500 from November 2011 through August 2012 [20].

Pierce pushed rate increases through the commission that boosted returns for Johnson Utilities by as much as $1.9 million [21]. Pierce also fought for Johnson's personal income taxes to be covered by the utility's customers in Pinal County [22].

Meanwhile, all three remained significant campaign donors -- George Johnson has given at least $27,054 to Republican candidates over the years, including at least $4,000 to Governor Ducey as well as $2,930 to Democrats [link,link].

Note that Governor Doug Ducey, State Senator Frank Pratt, State Treasurer Jeff DeWitt, and Secretary of State Michelle Reagan have donated to charity in amounts equivalent to the donations they received from Johnson and/or Norton and/or Pierce, some after considerable political pressure to give the money back.

Why It Matters

The Arizona Corporation commission is no stranger to scandal. In fact, the Johnson-Pierce-Norton bribery ring was only uncovered as part of a larger, long-term FBI investigation into insider dealing and election meddling at the ACC. Long before anyone suspected anything about Johnson Utilities, there were whispers about Gary Pierce's unusual loyalty to Arizona Public Service, the state's largest utility company. Pierce sided with APS in a debate over retail competition for electricity in 2013, and he championed a controversial APS proposal that would have imposed monthly fees of $50 or more on people who owned solar panels [23]. Was Pierce's loyalty rewarded? It's hard to be sure if there was ever a direct quid-pro-quo, but when Pierce’s son, Justin, ran for secretary of state in 2014, he benefited from $635,000 in dark-money spending -- money that many political observers believe was provided by APS [23, 24, 25].

APS is also widely believed to have been responsible for the $3.2 million in dark money spent to elect Tom Forese and Doug Little to the Commission in 2014 [26 ]. And in 2016, APS openly spent more than $1 million to elect Robert Burns, Andy Tobin and Boyd Dunn [28]. Given APS’s apparent efforts to fill the Corporation Commission with friends and loyalists, it should come as no surprise that the Commission recently approved an APS rate case, allowing the company to collect any additional $95 million from customers each year [29]. And with the support of commissioners they may have helped elect, APS created deep uncertainty for years about the fate of the state's solar industry -- one of the reasons that Arizona fell from #2 in the nation for solar installations installed in 2012 to #7 in the nation for solar installed in 2016 [30,31].

In yet another example, several commissioners are currently fighting to take away a potentially lucrative contract from one water company and give it to a competing water company — one that just so happened to donate tens of thousands of dollars to the campaigns of the commissioners in question [32].

The examples go on and on, and taken together, they paint a troubling picture of corruption, insider dealing, and election meddling at the AZ Corporation Commission and at the highest levels of the state's politics. In many of these cases, the alleged corruption and insider dealing may have had real, concrete consequences for the people of Arizona, from unnecessarily high water rates to the stifling of our state's solar industry. In short, the #AZWatergate scandal isn’t just a single, one-off bribery case -- it’s a symptom of a culture of corruption and impunity at the Arizona Corporation Commission and within the state's ruling elite that puts Arizona's environment, our water, and our progress at risk.